On Jul 7, we issued an updated research report on construction
Vulcan Materials Company
On May 6, Vulcan Materials reported solid first-quarter results.
Adjusted loss of 28 cents per share was narrower than the Zacks
Consensus Estimate of a loss of 34 cents as well as the year-ago
loss of 47 cents. Solid top-line performance and efficient cost
control offset higher costs resulting from weather related
production challenges which led to a decent earnings performance.
Total revenue increased 6.7% from the prior-year quarter owing to
another strong performance in aggregates.
Despite the chilly winter, aggregates volumes as well as pricing
increased in the quarter driven by growing demand for construction,
especially private construction. Both residential housing starts as
well as non-residential contract awards are showing steady
improvement benefiting from job growth, more attractive lending
standards and the general economic recovery. Sustained growth in
private construction activity improves the demand for both
aggregates as well as non-aggregates businesses of Vulcan
Materials. Vulcan Materials is seeing improvement in key markets
like Florida, Texas, California, Georgia and Arizona as private
construction activity improves steadily.
However, volume trends did slow down from the second half of
2014 due to inclement weather conditions. Moreover, disruptions in
production and shipping days led to increased costs which coupled
with unfavorable geographic mix weighed on margins. Also, limited
visibility on aggregates demand growth in public construction and
uncertainty surrounding September expiration of the current highway
bill keeps us concerned.
Nevertheless, Vulcan Materials enjoys strong fundamentals
including its strong aggregates reserves positions, continued
profit improvements, divestitures of non-strategic operations and
significant debt reduction.
Though aggregate volumes slowed down in the first quarter,
management expects the shipment delays to recover in the second
quarter resulting in better volumes as the construction season sets
in. Private construction is expected to continue to lead volume
growth in 2014. Additionally, large projects, including both public
infrastructure and private industrial projects, are expected to
contribute modestly to volume growth.
Other Stocks to Consider
Vulcan Materials carries a Zacks Rank #1 (Strong Buy). Other
stocks in the building construction/materials sector worth
Martin Marietta Materials Inc.
D.R. Horton, Inc.
Toll Brothers, Inc.
). All the three stocks carry a Zacks Rank #2 (Buy).
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VULCAN MATLS CO (VMC): Free Stock Analysis
TOLL BROTHERS (TOL): Free Stock Analysis Report
D R HORTON INC (DHI): Free Stock Analysis
MARTIN MRT-MATL (MLM): Free Stock Analysis
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